How are people affording these crazy home prices?

[tdhanses]

I really wish it would. The longer they keep this up the worse off as a nation we will be in my opinion. You can only kick the can so far down the road. And they have been kicking it for along time. How do they even get away with it. How do we even allow them to be so stupid with our money. I just don’t get it.


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Because in the end there is nothing we can do about it and they know that, I have a feeling we will not see a housing correction, once the market cools we’ll see even fewer homes available which will be when we see a bubble. These aren’t new home purchases on bad debt or interest only like we saw in 2008.

Even here in KC many are cash buyers, cash buyers don’t have to sell and can sit on investments.

 

[tdhanses]

Median home price in Durango is now $650k. Insanity.

Yeah I was shocked what my parents 1200sqft house they built 6 years ago is worth in Pagosa currently.

 

[.204smokechaser]

I’m an overtime slut for the Forest Service and I can’t even afford a house in most places in Idaho these days! Housing prices are getting ridiculous here and folks from Colorado, Cali, and Utah are paying a ridiculous amount of money for a place sight unseen driving people who work here out. Even some counties can’t fill their full time structure/EMS jobs due to lack of affordable housing.

 

[z987k]

I can afford most of the places I've looked at, but why on earth would I? It's a horrific investment right now. I'll be waiting when everyone that didn't pay cash in the last 2 years lists for 40% off and takes a bath.
The second the fed raises the interest rate, the house of cards will fall.

 

[Marble]

I’m that guy that was an idiot and sold my house in 2019 when the market was at an all time high where I live in Southern Utah and had decided that it was a good time to sell. We had a 4900sq/ft custom built home and our 2 oldest had just moved out so it left us with 1 kid at home. I talked my wife into selling because it seemed like we were due for a correction in my mind since it had been over 10 years since the last dip and we never planned on retiring in this home. Also with only 1 son at hike we didn’t need a hike the size of what we were living in. We had planned on buying property after we rented for a year or so and building our next home that would take us into retirement and live in until we die. So we ended up selling for $570k which at that time seemed like a ton since we had bought it 9 years earlier for $350k. Used some of the equity to pay off all our debt so we were debt free and kept a nice chunk of money in the bank. Now we have literally priced ourselves out of the market where we live and this is we’re we want to retire. Our house would have easily sold for a million right now. That’s over $400k that we have lost by selling. I’m so sick about how this has all worked out and not even sure what to think or do anymore. I make a great 6 figure salary but can’t imagine what people do to afford these $700k + mortgages. Are people in serious debt or is the rest of the country just making more money than I can even imagine. Talking to the realtors around here they are saying that many of the people buying the homes where we live in St. George are buying them as second homes and many paying cash. That’s just crazy. Also they say these are well qualified loans and have income to pay the mortgages unlike the 2008 housing crisis where they gave anyone a loan even without income verification.

What’s the end game here. Are these high prices here to stay (new normal) or is something catastrophic gonna happen or will there just be a small dip in real estate? I don’t know what or who to believe anymore. All I know is I’m always second guessing myself for selling but on the other hand happy I’m 100% debt free. My biggest concern is I had planned on retiring in 5 years. (Age 55). Now not owning a home I know that’s most likely a pipe dream and not gonna happen. I can’t go into retirement with a $3k a month mortgage. What are your thoughts. Should I buy now or wait it out at this point? My next home will be my forever home more than likely.


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The mistake you made was trying to time the market, based off of a time period. The thing you say about home prices are all correct, they are high, they may come down, they may go up. Who knows. What matters is the actions you take and the mindset you have.

You only make or lose money on stocks and real estate when you sell.

The second thing is, you waited to buy and got rid of some of the cash because of debt. That's not all horrible, and it's good your debt is paid off, it just changes the range of home or area in which you can live. You presented yourself with a false choice. You can still afford a home, it just may not be in one of the nicest neighborhoods or the size and features you were used to.

Don't view your home as a piggy bank and get hung up on its "perceived value." It's all relative. My wife wants to sell and buy another house because our house is worth so much more than it was worth when we bought it... We live in a really nice home, it is too big for us, in a nice neighborhood. But to get something similar, the cost would be so close to what we sell it for it's a wash.

Buy your home to make it a home. Sell when you are going to immediately put the money into something else.

Don't worry about the market, worry about your family can do to own a home.

You can still buy a home in the market, it just may not be what you previously could have purchased.


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[Ratbeetle]

I just put in an offer on a place this morning. It was a give me your best and final, we already have multiple offers situation. Went in a bit over asking with no financing contingencies and I still expect to get beat out.

Things are crazy and I can't help but feeling that we're at the top of the market. Of course, I felt that same way when we bought our house in CO in 2017 and we just sold that one for 60% over what we paid. I have no idea what to think about the housing market anymore. It just can't be sustainable, but if we get this one we plan to stay there for the next 20 years so I'm not as concerned if the market falls. But if inflation is here to stay, it may just keep going to the moon. Who the hell knows anymore.

Still sucks though when you look at the price history and just 3 years ago the house was valued at half of what we're going to have to pay now.

 

[Mike Islander]

You spent all your equity? If not, buy land and build.

 

[*zap*]

they incur more debt...

 

[AZ8]

Ha! You should see Flagstaff, AZ! Insane!!

If you don’t have cash here, you don’t have a chance. California buyers are out bidding everyone with cash. $50K+ over asking, all cash. No way to compete with that.

Something has to give.

 

[hodgeman]

The market will eventually correct. Current home prices aren't really sustainable over the long haul unless we see an across the board increase in wages.

Right now housing demand is driving the curve, my guess is we'll see the market soften next year. I doubt you'll see a 2008 style correction, but once builders start cranking out some homes or enough folks simply quit paying $300 a square foot in some unremarkable Smallville...prices will come down.

 

[Idaho_Potato]

I’m that guy that was an idiot and sold my house in 2019 when the market was at an all time high where I live in Southern Utah and had decided that it was a good time to sell. We had a 4900sq/ft custom built home and our 2 oldest had just moved out so it left us with 1 kid at home. I talked my wife into selling because it seemed like we were due for a correction in my mind since it had been over 10 years since the last dip and we never planned on retiring in this home. Also with only 1 son at hike we didn’t need a hike the size of what we were living in. We had planned on buying property after we rented for a year or so and building our next home that would take us into retirement and live in until we die. So we ended up selling for $570k which at that time seemed like a ton since we had bought it 9 years earlier for $350k. Used some of the equity to pay off all our debt so we were debt free and kept a nice chunk of money in the bank. Now we have literally priced ourselves out of the market where we live and this is we’re we want to retire. Our house would have easily sold for a million right now. That’s over $400k that we have lost by selling. I’m so sick about how this has all worked out and not even sure what to think or do anymore. I make a great 6 figure salary but can’t imagine what people do to afford these $700k + mortgages. Are people in serious debt or is the rest of the country just making more money than I can even imagine. Talking to the realtors around here they are saying that many of the people buying the homes where we live in St. George are buying them as second homes and many paying cash. That’s just crazy. Also they say these are well qualified loans and have income to pay the mortgages unlike the 2008 housing crisis where they gave anyone a loan even without income verification.

What’s the end game here. Are these high prices here to stay (new normal) or is something catastrophic gonna happen or will there just be a small dip in real estate? I don’t know what or who to believe anymore. All I know is I’m always second guessing myself for selling but on the other hand happy I’m 100% debt free. My biggest concern is I had planned on retiring in 5 years. (Age 55). Now not owning a home I know that’s most likely a pipe dream and not gonna happen. I can’t go into retirement with a $3k a month mortgage. What are your thoughts. Should I buy now or wait it out at this point? My next home will be my forever home more than likely.


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Why not downsize and remain close to debt free? 4900 sqft is an insane amount of space for 3 coming up on 2 people. Land is a kick in the nuts these days as well.

When I was younger I thought I wanted the custom home with the shop and land and maybe some animals etc. As I get older that saying keeps making more sense....the things you own end up owning you. I am incredibly happy living in a moderately sized home (1800 sqft) on a smallish lot in a quiet neighborhood in a town of less than 10,000.

Everything is cheap because it's a small town with just a walmart and a few restaurants. I don't have to spend more than 30 minutes on lawn care, and I could pay someone else to do it for next to nothing. I can travel to the mountains every weekend and not have to worry about projects around the house or land, fencing, animals etc. I don't even have a dog. It's way easy upkeep. I live alone though so YMMV.

 

[cnelk]

I was told by someone ‘in the know’ that all the cash home purchases was from all the marijuana money that is legal in many states


They can’t put the money in the bank since it’s considered drug money at the federal level.

Dunno - but it does make sense

 

[Trial153]

This place is depressing, the amount of doom and gloom is nuts.
Things of value have always historically been expensive for their time, hence the value. I hate to think the of all the opportunities I would have passed up my life always looking at things from an it will always get worse perspective.

 

[cnelk]

Then - they can turn around and take a loan out on the equity and Bingo - the money is laundered

 

[Tradchef]

It’s horrible in Bozeman area. People just buying then having them as AirBnB and charging freaking insane prices to stay and there seems to be no shortage of people that can pay those prices and the absurd home prices while statewide we are in a rental shortage with lots of folks leaving because they can’t afford to stay. Hell even our mediocre hotels in town were going for 900 a room. You could go stay at the ritz , st Regis or 4 seasons for less than that. I’m just a dumbass chef that’s debt free with a solid salary but what in hell do these people do to afford this kind of lifestyle?

 

[fngTony]

I have know idea but we would need to earn 30% more if we’re to buy our house again. Wages definitely haven’t increased that much since we bought 3.5 years ago.

 

[MuleyFever]

We bought our current house about 5 years ago and for the last 3 years we have been looking for something else on a few acers. Prices just keep going and there is no way I am trying to buy something at these recent prices. We just decided to refinanced at 1.87% and plan to pay off the house in 7-8 years or so instead. If prices correct we will be ready to make a move. These low interest rates are a big reason people can afford these mortgages. Interest rates go up the market will cool off. There is unlikely to be any big correction or crash though. The shortage of housing is going to keep demand up.

 

[Savage99]

This place is depressing, the amount of doom and gloom is nuts.
Things of value have always historically a
been expensive for their time, hence the value. I hate to think the of all the opportunities I would have passed up my life always looking at thing from it will always get worse perspective.

Well, it’s also nuts to ignore how much home prices have risen in a short time. How are first time homebuyers supposed to enter a market like this? Many have been priced out who may have been saving for some time and now this. It’s not just passing up opportunities when you all of the sudden can’t afford them. Yea, move somewhere cheaper. It’s just not that simple.


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[Beendare]

Multiple reasons for prop values rising;

Inflation; the fed gov is pumping money into the system at record levels-

Interest rates are at record lows- again artificially low. This makes it easier for people to qualify for more mortgage debt. Back in the Jimmy Carter admin mortgage rates were in the high teens And few people could qualify for loans on high price homes, thus it tanked home prices. ( note; this artificially Low interest rate makes it easier for the federal government to pay on the trillions of dollars it generates in debt. When the rates rise, watch out. Granted they never intend to pay it all back, but it skews the GDP/ debt ratio to hugely negative- a waterfall effect)

Work from home; folks are realizing they want a nice home and are willing to upgrade. Have you tried hiring a contractor lately? I’m six months out from even looking at a new project. Then; folks are more mobile…they are spreading out as they can work from anywhere.

A few examples here in my area where homes sold for $1 million over asking- crazy.

.

 

[landman650]

30 year mortgages. The single worst financial thing that has probably happened to the middle and lower classes In the last 30 years. Not knocking you if you have one but this has made what wasn’t affordable, affordable. Meanwhile, the surplus of buyers this creates has put upward pressure on home prices.
The cost of capital for these mortgages basically costs you almost double what the home is worth = Less equity in the home.